KRISPY KREME DOUGHNUT
CORPORATION
INTERNATIONAL FRANCHISE AGREEMENT
THIS
AGREEMENT is made and entered into on this ___day of 20___, by
and between Krispy Kreme Doughnut Corporation, a North Carolina
corporation, with its principal business address at P.O. Box 83,
Winston-Salem, North Carolina 27102 (“Company”) and
_____, a _____, whose principal business address is _____
(“Franchisee”).
Company has
developed a unique system for the operation of store facilities
called “Krispy Kreme Stores” that offer and serve a
variety of fresh doughnuts and certain other quality food products
under the trademark and service mark “KRISPY
KREME.”
Company
operates, and licenses others to operate, Krispy Kreme Stores using
the Krispy Kreme System. Company grants to persons who meet its
qualifications and are willing to undertake the investment and
effort a franchise to own and operate a Krispy Kreme Store offering
the Products and other products and services Company authorizes and
utilizing the Krispy Kreme System subject to the terms and
conditions of this Agreement.
Pursuant to the
terms of the Development Agreement, Franchisee has applied for a
franchise to own and operate a Krispy Kreme Store.
Affiliate means any person that directly or indirectly
owns or controls, that is directly or indirectly owned or
controlled by, or that is under common ownership or control with,
Company or Franchisee.
Competitive
Business means a business
or enterprise, other than a Krispy Kreme Store, that: (i) sells
yeast raised doughnuts, cake doughnuts, or any other types of
doughnuts, miniature doughnuts or doughnut holes in any
distribution channels to any customer for consumption or resale and
such sales constitute ten percent (10%) or more in total or at or
from any single location; (ii) sells coffee in any
distribution channels to any customer for consumption or resale and
such sales constitute twenty percent (20%) or more in total or at
or from any single location; or (iii) grants or has granted
franchises or licenses, or establishes or has established joint
ventures, for the development and/or operation of a business that
offers the food products referred to in (i) or (ii) in any
such channel of distribution.
Copyrighted
Works means the contents
of the Manuals and all other know-how, information, specifications,
systems and data used by Company in or in respect to the Krispy
Kreme System,
including,
without limitation, trade secrets, copyrights, designs, patents,
and other intellectual property.
Development
Agreement means the
development agreement pursuant to which Franchisee has applied for
a franchise to own and operate a Krispy Kreme Store.
Dollar or $ means the legal currency of the
United States.
Franchise means the rights granted and the obligations
imposed pursuant to this Agreement that relate to the operation of
the STORE at the Site and to the use of the Krispy Kreme System in
the operation thereof.
General
Manager means the general
manager of the STORE that Franchisee designates concurrently with
the execution of this Agreement and identifies in Exhibit A
attached hereto.
Grand
Opening Marketing Program means the grand opening public relations and
marketing program that Franchisee is required to conduct for the
STORE in accordance with Subsection 6.2 of this
Agreement.
Gross
Sales means all revenue
Franchisee derives from sales of Products and operation of the
STORE, whether from cash, check, credit card or credit
transactions, but excluding all federal, state or municipal sales,
value added, use or service taxes collected from customers and paid
or payable to the appropriate taxing authority.
HDN means HDN Development Corporation.
Initial
Franchise Fee means the
non-recurring and non-refundable initial franchise fee that
Franchisee agrees to pay Company per STORE prior to the opening of
such STORE. The amount of the Initial Franchise Fee is specified in
Schedule A.
Krispy Kreme
System means the
distinctive business formats, methods, procedures, designs,
lay-outs, equipment, mixes, standards and specifications designated
by Company for use in Krispy Kreme Stores, all of which Company may
modify from time to time, along with the Marks.
Managing
Director means the
managing director of Franchisee’s business. The initial
Managing Director will be identified in Exhibit A of this
Agreement.
Manuals means such materials (including, without
limitation, if applicable, audiotapes, videotapes, magnetic media,
computer software and written materials) that Company generally
furnishes to franchisees from time to time for use in operating
Krispy Kreme Stores.
Marks means the trademarks, service marks, trade dress
and other commercial symbols used in the operation of Krispy Kreme
Stores, including, without limitation, the trade and service marks
“KRISPY KREME” and associated logos, as same may be
changed, enhanced or supplemented from time to time.
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Non-Core
Products means any
product identified by the Marks other than the Products, such as,
for example, ice cream, clothing, hats, cups and other logoed
items, etc.
Owner means each person other than Company and its
Affiliates holding a direct or indirect legal or beneficial
Ownership Interests or voting rights in Franchisee, including,
without limitation, any person who has a direct or indirect
interest in Franchisee, this Agreement, the Franchise or the STORE
(and any person who owns, directly or indirectly, a five percent
(5%) or greater Ownership Interest in any such person (other than
Company or its Affiliates), including without limitation any person
who has any legal or equitable interest, or the power to vest in
himself or herself any legal or equitable interest, in the revenue,
profits, rights or assets thereof.
Ownership
Interest means in
relation to any of the following: (a) a corporation, the
ownership of shares in the corporation; (b) an unlimited or
limited liability company, the memberships or other ownership
interest of such company; or (c) a partnership, the general
and limited partnership interests in such partnership.
Payment
Day means the day of the
week specified in Schedule A on which the Royalty is
due.
Principal
Owner means the Principal
Owners specified in Exhibit A.
Products means a variety of fresh doughnuts (including
among others, yeast raised doughnuts, cake doughnuts, miniature
doughnuts and doughnut holes, some of which have various types and
flavors of fillings, glazes or other coatings) as well as certain
other food products and beverages (specifically including, but not
limited to, coffee) and food services as identified by Company from
time to time and which are customarily sold in Krispy Kreme
Stores.
Royalty means the payment made by Franchisee to Company
on the Payment Day each week based on the Gross Sales of the STORE
for the preceding week. The amount of Royalty to be paid is
specified in Schedule A.
Site means a physical location that Company has
approved as meeting its minimum criteria for the development and
operation of the STORE.
STORE means the Krispy Kreme Store owned and operated
by Franchisee pursuant to this Agreement.
System
Standards means the
mandatory and suggested specifications, standards, operating
procedures and rules that Company prescribes from time to time for
the operation of Krispy Kreme Stores including, without limitation,
the standards, specifications and other requirements related to the
purchase, preparation, marketing and sale of the Products and
Non-Core Products; customer service; the design, décor and
appearance of the STORE; the maintenance and remodeling of the
STORE and the equipment, fixtures and furnishings therein; the use
and display of the Marks; the insurance coverage required to be
carried for the STORE; the hiring and training of STORE employees;
the days and hours of STORE operation; and the content, quality and
use of advertising and promotional materials.
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Transfer means with respect to a Franchise, the STORE,
this Agreement or an Ownership Interest in Franchisee, any of the
following, without limitation, whether voluntary or involuntary,
direct or indirect: (i) an assignment, sale, gift or pledge;
(ii) the grant of a mortgage, lien, security interest, charge,
or any encumbrance whatsoever including, without limitation, the
grant of a collateral assignment; and (iii) a transfer that
occurs as a result of Franchisee’s insolvency or dissolution
or other transfer by operation of law. The term
“Transfer” will not be deemed to include (i) the
grant of a lien or security interest to secure financing for the
acquisition of equipment, fixtures and supplies for the STORE;
(ii) an assignment of a leasehold interest in a Site in
accordance with the terms of this Agreement; or (iii) the
relocation of the STORE from one Site to another Site.
Website means an interactive electronic document
contained in a network of computers linked by communications
software.
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2.
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GRANT OF FRANCHISE
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2.1
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Company grants to Franchisee the
right to use the Krispy Kreme System for a term of fifteen
(15) years (the “Term” ) solely in
connection with the conduct and operation of the STORE and subject
to the terms and conditions of this Agreement.
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2.2
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During the Term, Franchisee will
strictly and diligently perform its obligations under this
Agreement and will continuously exert its best efforts to promote
and enhance the development, operation and success of the
STORE.
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2.3
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In
addition to selling the Products, Franchisee will sell such other
goods as Company may require from time to time in its sole
discretion.
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2.4
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No
exclusive territory, protection or other right in the contiguous
space, area or market of the STORE is expressly or impliedly
granted to Franchisee. Company reserves the right to operate or to
grant others the right to operate Krispy Kreme Stores at any
location other than the location of the STORE; to acquire and
operate, or be acquired by, a business operating one or more
businesses located at any location other than the location of the
STORE; to develop, manufacture, distribute and/or sell, and license
others to develop, market, distribute and/or sell, Products to
customers located anywhere in the world through any channel of
distribution; and to develop, manufacture, distribute and/or sell,
and license others to develop, market, distribute and/or sell,
Non-Core Products to customers located anywhere in the world
through any channel of distribution.
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3.
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INITIAL FRANCHISE FEE AND
ROYALTY
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3.1
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Concurrently with the execution of
this Agreement and prior to the opening of the STORE, Franchisee
agrees to pay to Company the Initial Franchise Fee specified in
Schedule A.
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3.2
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On
or before the Payment Day each week, Franchisee will (a) pay
to Company the Royalty on the Gross Sales of the STORE for the
preceding week and (b) report to
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Company, in the form Company
requires from time to time, the true and correct Gross Sales of the
STORE for the immediately preceding week ending on
Sunday.
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4.
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MANUALS AND SYSTEM
STANDARDS
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4.1
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Solely for use in operating the
STORE during the Term, Company will loan Franchisee one (1) copy of
its Manuals. The copy of the Manuals that Company loans to
Franchisee will be in English, however, Franchisee will, at its own
expense, translate the Manuals into the language of the geographic
area within which the STORE is located. Franchisee will keep its
copy of the Manuals current and in a secure location at the STORE.
If Franchisee’s copy of the Manuals is lost, destroyed or
significantly damaged, Franchisee will obtain a replacement copy at
Company’s then applicable charge. Franchisee may not at any
time copy, duplicate, record or otherwise reproduce any part of the
Manuals. Franchisee may not distribute any part of the Manuals and
may not disclose any part of the Manuals to any person other than
its employees who have a need to know the contents of the Manuals
in order to perform their jobs.
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4.2
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During the Term, Franchisee will
comply with all of the Manuals and the System Standards they
contain in addition to all applicable laws, regulations, rules,
by-laws, orders and ordinances in connection with its operation of
the STORE. The Manuals are incorporated by reference into this
Agreement. In the event of a dispute relating to the contents of
the Manuals, the master copy of the Manuals maintained by Company
at its principal office, is controlling. Company may at any time
and from time to time change the Manuals to reflect changes in
System Standards.
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4.3
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To
determine whether Franchisee is in compliance with this Agreement
and all System Standards, Company and/or its agents have the right
at any time during regular business hours, and without prior notice
to Franchisee, to: (a) inspect the STORE; (b) observe,
photograph and videotape the operations of the STORE;
(c) remove samples of any Products, materials or supplies for
testing and analysis; (d) interview personnel of the STORE;
(e) interview customers of the STORE and to require Franchisee
to present to its customers any such evaluation forms periodically
prescribed by Company and to participate in and/or request its
customers to participate in any surveys performed by or on behalf
of Company; and (f) inspect and copy any books, records and
documents relating to the operation of the STORE.
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5.
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APPROVED PRODUCTS AND
SUPPLIERS
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5.1
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Pursuant to a supply program
established by Company, Company is the sole supplier to Franchisee
of certain mixes, products, equipment and fixtures which consist
of, but are not limited to, the items described in Exhibit B
attached hereto. In the event Franchisee is in breach of this
Agreement pursuant to Subsection 14.2 then, in addition to other
remedies hereunder or under applicable law, Company may withhold
delivery of such items to Franchisee until Franchisee cures such
breach in accordance with Subsection 14.2.
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5.2
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Franchisee may purchase Non-Core
Products only from Company and/or suppliers designated or approved
by Company from time to time.
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5.3
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Franchisee will purchase supplies
for the STORE only from Company or from local suppliers that
Company from time to time designates or approves. Company will
periodically provide Franchisee with a list of approved products
and supplies and designated and approved suppliers. If Franchisee
wishes to use any type or brand of product or supply item or wishes
to purchase products or supplies from a supplier that is not
currently designated or approved by Company, Franchisee will submit
to Company specifications, photographs, samples and/or other
information Company may request. Company has the right to inspect a
proposed supplier’s facilities. Company will, within a
reasonable time, determine whether such products, supplies or such
supplier meets its specifications and standards and notify
Franchisee whether it is authorized to use such product or supply
item or purchase from such supplier. Company reserves the right to
periodically re-inspect the facilities and products of any supplier
it has accepted and to revoke its acceptance if the supplier does
not continue to meet Company’s criteria.
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6.
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ADVERTISING AND PUBLIC
RELATIONS
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6.1
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Company has established a Brand Fund
(the “Brand Fund” ) for the advertising,
promotional, marketing and public relations programs and materials
Company deems appropriate. Franchisee agrees to contribute to the
Brand Fund an amount equal to one-quarter percent (.25%) of the
STORE’s Gross Sales, payable in the same manner as the
Royalty.
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6.2
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Company will direct all programs
that the Brand Fund finances. The Brand Fund periodically will give
Franchisee samples of advertising, marketing, and promotional
formats and materials at no cost. At Franchisee’s request,
Company will sell Franchisee multiple copies of these
materials.
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6.3
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Company will account for the Brand
Fund separately from its other funds and will not use the Brand
Fund for any of its general operating expenses. However, Company
may use the Brand Fund to pay the reasonable salaries and benefits
of personnel who manage and administer the Brand Fund, and to pay
other expenses that Company incurs in activities reasonably related
to the management and administration of the Brand Fund.
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6.4
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The
Brand Fund will not be Company’s asset. Although the Brand
Fund is not a trust, Company will hold all Brand Fund contributions
for the benefit of the contributors and use contributions only for
the purposes described in Subsections 6.1 through 6.8. Company does
not have any fiduciary obligation for administering the Brand Fund
or for any other reason. The Brand Fund may spend in any fiscal
year more or less than the total Brand Fund contributions in that
year, borrow from Company or others (paying reasonable interest) to
cover deficits, or invest any surplus for future use. Company will
use all interest earned on Brand Fund contributions to pay costs
before using the Brand Fund’s other assets.
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6.5
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Company will prepare an annual,
unaudited statement of Brand Fund collections and expenses and give
Franchisee the statement upon written request. Company may have the
Brand Fund audited annually, at the Brand Fund’s expense, by
an independent certified public accountant. Company may incorporate
the Brand Fund or operate it through a separate entity whenever
Company deems appropriate. The successor entity will have all of
the rights and duties specified in Subsections 6.1 through
6.8.
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6.6
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Company cannot ensure that Brand
Fund expenditures in or affecting any geographic area are
proportionate or equivalent to Brand Fund contributions by
contributors operating in that geographic area or that any
contributor benefits directly or in proportion to its Brand Fund
contribution.
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6.7
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Company has the right, but no
obligation, to use collection agents and institute legal
proceedings to collect Brand Fund contributions at the Brand
Fund’s expense. Company may also forgive, waive, settle and
compromise any and all claims by or against the Brand Fund. Except
as expressly provided in Subsections 6.1 through 6.8, Company
assumes no direct or indirect liability or obligation to Franchisee
for collecting amounts due to, maintaining, directing or
administering the Brand Fund.
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6.8
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Company may at any time defer or
reduce the Brand Fund contributions of one or more franchisees and,
upon thirty (30) days’ prior written notice to
Franchisee, reduce or suspend Brand Fund contributions and
operations for one or more periods of any length and terminate
(and, if terminated, reinstate) the Brand Fund. If Company
terminates the Brand Fund, it will distribute all unspent monies to
its franchisees, and to Company and its affiliates, in proportion
to their, and its, respective Brand Fund contributions during the
preceding twelve (12) month period.
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6.9
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Franchisee will not execute or
conduct any advertising or promotional activity in relation to the
STORE or the Krispy Kreme System without Company’s prior
written approval.
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6.9
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Franchisee will be responsible for
conducting, with Company’s guidance, the Grand Opening
Marketing Program during the period commencing thirty
(30) days before and ending ninety (90) days after the opening
of the STORE. The Grand Opening Marketing Program will utilize the
public relations and advertising programs and media and advertising
and promotional materials that Company has developed or
approved.
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6.9
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During each twelve (12) month
period of the Term, Franchisee will spend for advertising and
promotion of the STORE not less than three percent (3%) of the
STORE’s Gross Sales. Company will have the right to review
Franchisee’s books and records from time to time to determine
Franchisee’s expenditures for such advertising and
promotion.
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6.10
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Before Franchisee uses any
advertising, promotional or marketing materials which Company has
not prepared or previously approved, Franchisee must send samples
of all such materials to Company for approval. If Franchisee does
not receive Company’s
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written approval within thirty
(30) days after Company receives the materials, they are
deemed approved. Franchisee may not use any advertising,
promotional, or marketing materials that Company has
disapproved.
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6.11
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Franchisee agrees that any
advertising, promotion and marketing it conducts will be completely
clear and factual and not misleading and conform to the highest
standards of ethical marketing and the promotion policies that
Company prescribes from time to time.
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6.12
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Company may modify or add to its
Website to include information relating to the STORE. Company will
control Website traffic and registration of additional domain
names.
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7.
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TRAINING AND GUIDANCE
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7.1
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Before the STORE begins operating,
Company will furnish, at no additional cost to Franchisee, a
training program covering the operation of a Krispy Kreme Store for
up to two (2) managers. Such training program will be
conducted at Company’s designated training facility and/or at
an operating Krispy Kreme Store. The STORE manager(s) must complete
the training to Company’s satisfaction. Company will furnish,
again at no additional cost to Franchisee, and subject to the
schedules of the training program in effect from time to time, the
same training program to one (1) additional manager of the
STORE per year that Franchisee hires after the STORE opens for
business. Company may charge reasonable fees for the training of
any managers thereafter. Franchisee will be responsible for the
wages, salaries, travel and living expenses that any STORE
manager(s) incur in connection with the training.
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7.2
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A
management training program and/or modified training programs will
be available at no charge to such members of Franchisee’s
senior management as are selected by Company, which members will be
required to complete Company’s management training program
and/or modified training programs to Company’s satisfaction.
Franchisee will be responsible for all travel and living expenses
and compensation of its personnel who attend a training program. If
any such member is unable to satisfactorily complete the training
program, Franchisee will promptly designate a replacement for such
member, who will satisfactorily complete the training program. Any
subsequent training performed by Company will be at times and
places designated by Company and at per diem charges established by
Company from time to time.
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7.3
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Company may require previously
trained and experienced STORE managers to attend up to one (1)
refresher training course per year at such times and locations that
Company designates.
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7.4
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Company will provide guidance and
assistance to Franchisee from time to time and in the manner
Company deems appropriate, regarding the operation of the STORE.
Furthermore, if Franchisee requests or Company requires additional
or special training for Franchisee’s employees, all of the
expenses incurred by Company in connection with
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such training, including, without
limitation, per diem charges for travel and living expenses for
Company’s personnel, will be Franchisee’s
responsibility.
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8.
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MARKS AND COPYRIGHTED
WORKS
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8.1
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Franchisee acknowledges and agrees
that the Marks and Copyrighted Works are owned by and are the
valuable property of Company and/or HDN. Franchisee will acquire no
right, interest or benefit in or to the Marks or Copyrighted Works
other than the limited rights of use granted under this Agreement.
If Company authorizes Franchisee to prepare any new works,
translations or derivative works from the Copyrighted Works,
Franchisee hereby agrees that such new works, translations or
derivative works will be the property of Company, and Franchisee
hereby assigns, throughout the world, and will cause all authors or
owners thereof likewise to assign, throughout the world, all right,
title and interest in and to such new works, translations and
derivative works to Company. Franchisee further covenants that any
such new materials, new works, translations or derivative works
created by Franchisee or by any third party engaged by Franchisee
are original to Franchisee or to such third party and do not
violate the rights of any other person or entity; this covenant
regarding originality shall not extend to any materials supplied by
Company to Franchisee, but does apply to all materials Franchisee
or its third party contractors may add thereto. Franchisee hereby
waives all “moral rights” it may have in such new
materials, new works, translations or derivative works, and shall
cause its third party contractors to waive all “moral
rights” they may have in such new materials, new works,
translations or derivative works. Franchisee will submit all such
materials, reproduction or other new works, translations or
derivative works to Company for approval prior to use. All usage of
the Marks and Copyrighted Works by Franchisee and any goodwill
established thereby will inure to the exclusive benefit of Company
and/or HDN. Franchisee agrees that it will in no way represent that
it is the owner of, or has any right, title or interest in the
Marks or Copyrighted Works other than the rights granted under this
Agreement. Any unauthorized use of the Marks or Copyrighted Works
by Franchisee will be a breach of this Agreement and will
constitute an infringement of the rights of Company and HDN in and
to the Marks and/or in the Copyrighted Works. Upon the expiration
or termination of this Agreement for any reason, Franchisee will
have no claim whatsoever against Company or HDN for compensation
for any goodwill associated with the Marks and Copyrighted
Works.
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8.2
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Franchisee will use the Marks and
Copyrighted Works only in such form and manner as is expressly
authorized by Company or HDN from time to time, and Franchisee will
follow Company or HDN’s instructions regarding proper usage
of the Marks in all respects. Franchisee will ensure that all
Copyrighted Works used hereunder bear an appropriate copyright
notice under the Universal Copyright Convention or other copyright
laws as prescribed by Company or HDN. Company or HDN may, by notice
to Franchisee, at any time change or withdraw any of the Marks and
Copyrighted Works or designate new Marks or works in which
copyright subsists, and Franchisee will implement such changes,
withdrawals and additions within the period specified in the notice
and at Franchisee’s expense.
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8.3
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Franchisee will not apply for or
assist any third party in applying for, or seek to apply for,
registration of any of the Marks, or any mark which is
substantially identical or confusingly similar to the Marks or any
of the Copyrighted Works, or Copyrighted Works or any portion
thereof or Company’s or HDN’s proprietary rights in the
Confidential Information anywhere in the world.
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8.4
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Franchisee will do nothing to
prejudice, damage or contest the validity of the Marks (and
registration thereof), the Copyrighted Works, the goodwill
associated with the Marks and the Copyrighted Works, and Company
and HDN’s proprietary rights in the Confidential Information.
Franchisee will cooperate fully with Company in the protection and
defense of the Marks and the Copyrighted Works. Franchisee will
immediately notify Company of any apparent infringement of or
challenge to Franchisee’s use of any Mark or Copyrighted
Work, or claim by any person of any rights in any Mark or a
confusingly or deceptively similar trademark, service mark or other
item of intellectual property or Copyrighted Work. Franchisee will
not communicate with any person other than its counsel and local
governmental authorities (if required), Company and/or its counsel
with respect to any such infringement, challenge or claim. Company
has sole discretion to take such action as it deems appropriate in
connection with any such infringement, challenge or claim of
rights, and the right to control exclusively any settlement or
legal processing arising out of any such infringement, challenge or
claim or otherwise relating to any Mark or Copyrighted Work. Any
award, or portion of an award, recovered by Company and/or HDN in
any such action or proceeding shall belong solely to Company and/or
HDN.
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9.
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CONFIDENTIALITY AND EXCLUSIVE
RELATIONSHIP
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9.1
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Franchisee will at all times during
and after the Term keep confidential and not disclose to any
person, other than with Company’s prior written approval, the
terms of this Agreement and any related agreements, the System
Standards, the Manuals, all other materials containing or referring
to the Marks or Copyrighted Works and all other information
concerning the Krispy Kreme System, the Marks or Copyrighted Works,
the Products or Non-Core Products, or Company’s business and
affairs which may come to Franchisee by any means during the Term.
Company may disclose the Manuals to Franchisee by any means during
the Term. Franchisee may disclose the Manuals to Franchisee’s
employees, on a need-to-know basis, only for the purposes of
operating the STORE and provided that Franchisee at all times uses
best endeavors to ensure that Franchisee’s employees retain
in confidence the Manuals and any other materials or information
disclosed to them with Company’s approval. This obligation of
confidentiality does not apply in respect of information in the
public domain or previously known to Franchisee otherwise than by
breach of any obligation of confidentiality, or disclosure required
by law or an order of any court or tribunal. Franchisee
acknowledges that any breach of this obligation of confidentiality
may cause substantial irreparable damage to Company and that, in
addition to damages or other monetary compensation, injunctive or
other equitable or immediate relief may be appropriate.
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9.2
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Franchisee acknowledges that Company
has granted Franchises to Franchisee in consideration of and
reliance upon Franchisee’s agreement that it and its Owners
will deal exclusively with Company. Franchisee therefore agrees
that, during the Term, neither Franchisee nor any of its Owners
will, anywhere in the world: (a) have any direct or indirect
Ownership Interest in any Competitive Business (this restriction is
not applicable to the ownership of shares of a class of securities
listed on a stock exchange or traded on a public stock market that
represent less than three percent (3%) of the number of shares of
that class of securities issued and outstanding); (b) perform
services as a director, officer, manager, employee, consultant,
representative, agent or otherwise for any Competitive Business; or
(c) recruit or hire any person who is Company’s employee
or the employee of any Krispy Kreme Store or who has been
Company’s employee or the employee of any Krispy Kreme Store
within the past six (6) months without obtaining prior written
permission from Company or that person’s employer. Franchisee
acknowledges and agrees that the failure of any person or entity
restricted by this Section to comply with this Section will
constitute a breach of this Agreement by Franchisee.
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10.
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ACCOUNTING, REPORTS AND FINANCIAL
STATEMENTS
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10.1
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Franchisee will, at its expense,
retain all records relating to the development and operation of the
STORE. Franchisee will furnish to Company via the medium Company
prescribes from time to time, in a form consistent with its
then-current accounting practices and procedures: (a) weekly
reports of the STORE’s sales, cost of goods sold, labor
expense and number of transactions by 12:00 noon (Eastern Standard
Time) on Tuesday of each week for the preceding week;
(b) within thirty (30) days after the end of each month,
an operating income statement of Franchisee for such month and
fiscal year to date, prepared in accordance with generally accepted
accounting principles consistently applied in the geographic area
within which the STORE is located; (c) within forty-five
(45) days after the end of each fiscal quarter, a balance
sheet and income statement of Franchisee for such quarter and
fiscal year to date, prepared in accordance with generally accepted
accounting principles consistently applied in the geographic area
within which the STORE is located; (d) within one hundred
twenty days (120) days after the end of Franchisee’s
fiscal year, an income statement for the STORE for such fiscal year
(reflecting all year-end adjustments), and a statement of cash flow
of the STORE, prepared in accordance with generally accepted
accounting principles consistently applied in the geographic area
within which the STORE is located; and (e) upon request by
Company, such other data, reports, information and supporting
records as Company may from time to time prescribe.
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10.2
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Franchisee agrees to maintain and to
furnish to Company, upon request, complete copies of all
withholding, income, sales, value added, use and service tax
returns filed by Franchisee reflecting activities of the STORE.
Company has the right to (a) disclose data derived from such
reports without identifying Franchisee or the location of the
STORE; (b) require Franchisee to have audited financial
statements prepared on an annual basis; and (c) to access all
cash registers/computer terminals and Franchisee’s computer
system and retrieve all information relating to the STORE, as often
as it deems appropriate.
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Franchisee will take such action as
may be necessary to provide such access to Company. Furthermore,
Franchisee will immediately report to Company any events or
developments which may have a significant or material adverse
impact on the operation of the STORE, Franchisee’s
performance under this Agreement, or the goodwill associated with
the Marks and Krispy Kreme Stores. Franchisee will sign and verify
as correct each report and financial statement submitted by
Franchisee in the manner prescribed by Company.
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10.3
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Company will comply with all
applicable consumer privacy and data protection laws and
regulations and with any consumer privacy and data protection
policies of Company in effect from time to time, including without
limitation all laws, regulations and policies relating to any
transfer of personal information by Franchisee to Company.
Franchisee acknowledges and agrees that it is solely responsible
for determining whether its data processing policies relating to
international transfers of personal information are in compliance
with all applicable laws and regulations. Franchisee will
immediately notify Company if Franchisee discovers that its or
Company’s consumer privacy and data protection policies
applicable to Franchisee are not in conformity with applicable laws
and regulations, including without limitation all laws and
regulations relating to any transfer of personal information by
Franchisee to Company.
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10.4
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Company has the right to audit at
any time during regular business hours, and without prior notice to
Franchisee, to inspect and audit, or cause to be inspected and
audited, the business,
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